How to Navigate the Mortgage Loan Closing Process

Mortgage closing, sometimes known as a settlement, is when you sign the documents to buy a home. Remember the amount of paperwork you had to sign to buy a new car? Multiply that by a factor just under infinity to get an idea of how much paperwork you’ll face during the mortgage closing process.

Some settlement agents have adopted paperless closings, but the industry has been slow to change. More than likely, a printer will be spitting out a pile of warm paper on your behalf.

The 30-year decision

You may not plan to stay in your home for 30 years, but if you take out a traditional mortgage, you’re committing to paying a 30-year debt. Take a moment to consider the interest you’ll pay just in the first five years. That’s when it will hit you: This really is a big deal — so big that you might not want to go it alone.

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The closing attorney represents the seller or the lender, but not you. If your state does not require a buyer’s attorney to be present at closing, take with you a real estate agent or someone who knows the process. This definitely is a time when no question should go unanswered. Make sure you understand the details of everything you sign.

What to expect during the mortgage closing process

From start to finish, here’s a checklist for the closing period. The time from signed contract to loan closing typically spans 30 to 60 days.

• Take the signed sale contract to your lender and begin the finalization of your loan. At that time, you’ll consider whether you want to lock in your interest rate. The lender will give you a loan estimate (mandated by the “Know Before You Owe” TRID regulations) detailing the terms and costs of your loan within three days.
• Order a home inspection, and perhaps a radon and termite inspection. Try to schedule them so you can tag along.
• Confirm that your lender has ordered an appraisal.
• Follow up on matters uncovered by the home inspection.
• Track deadlines on any contingencies, which are conditions of a sale that are negotiated as part of the contract, such as the seller fixing the roof or the buyer arranging financing.
• Contact your insurance agent to establish a homeowners policy to go into effect the day of closing.
• Schedule utility transfers and complete a change-of-address form. Attend to other moving details.
• Has the closing date been set? Make sure you know where the closing will be held — and how to get there.
• Read the official closing disclosure before the closing date to review all the terms and the fees that will be due at signing. Compare it to the loan estimate you received previously. If there’s a discrepancy, talk to your lender right away.
• Know how much you’ll have to pay in closing costs — and how you’ll be paying (cashier’s check, certified check, wire transfer, etc.).
• Close out any contingencies.
• Confirm with the lender that the mortgage loan process is on track for the scheduled closing date.
• A day or so before closing, conduct a walk-through of the home to be sure it’s in proper condition. If there’s a problem, your agent will need to contact the seller immediately to discuss possible remedies or adjustments at closing.
• Determine whether any additional information or documentation will be required at closing.
• Bring a photo ID and closing funds.
• Sign a mountain of paperwork.
• Get the keys!

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What’s the deal with a home warranty?

As a part of the mortgage closing process, you might be offered the option of purchasing a home warranty. A typical basic warranty can run about $500 per year, according to Realty Times. As with any other service contract offered with a major purchase, it has pros and cons:

• Pros: You’re likely to receive discounted (but probably not free) service calls as well as the repair or replacement of appliances and major systems such as electrical, plumbing, air conditioning and furnace. Having a home warranty can provide some extra peace of mind, especially if you’ve purchased a distressed property.
• Cons: There’s always fine print. Be sure to read the exclusions and limitations. You probably won’t be able to choose your service provider, and some services might require additional fees.

Prepare for the unexpected

Gathering around a table with stacks of documents to sign can be intimidating. Have a cup of coffee, chat a few moments and settle in. Take as much time as you need to read everything closely.

There might be last-minute glitches. A fee here or there may vary from the original estimate, and you deserve a full explanation of any changes. And your interest rate could change, unless you paid for a rate lock. (Do you have it in writing?) Most of the time, the closing goes smoothly, but if things spiral out of control, remain calm. You can’t be forced to close the deal if you suddenly become uncomfortable with the process.

If you decide to walk away, ask how much money it will cost you. Almost certainly, you’ll lose the earnest money in escrow — and there can be additional damages for a contract default. It’s not a decision to make lightly.

Now that you’ve had that little moment of drama, relax. Expect things to go well. You’re just that much closer to getting the keys to your new home.

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Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: hal@nerdwallet.com. Twitter: @halmbundrick.

This article was updated June 29, 2016. It was originally published April 7, 2016.